1. The Petitioners are a Company registered under the Companies Act and are one of the pioneers in the manufacture of cold rolled high carbon and alloy steel and special steel strips in India. Under the provisions of the Import Trade Control Policy, the petitioners are entitled to import hot rolled stainless steel strips being the actual users. The import is canalised through the Mineral and Metals Trading Corporation Limited (hereinafter referred to as the 'Corporation') which awards contracts for the raw material supply to the actual users on the basis of worldwide tenders floated by the Corporation.
2. The Joint Chief Controller of Imports and Exports had issued a release Order dated March 29, 1974 in favour of the petitioners whereby the petitioners were required to approach the Corporation for securing the allotment of 100 tonnes of hot rolled stainless steel strips in coils of C.I.F. value of Rs. 10,00,000/-. In pursuance of the aforesaid release order, the petitioners approached the Corporation and placed an order and the Corporation in its turn entered into a contract dated February 4, 1974 with the foreign suppliers. The size and specification of the goods to be supplied were as under :-
'Stainless steel strips conforming to A.I.S.I. 304 in hot rolled annealed and pickled condition in coil form of the size of 3.25 mm. x 300 mm. The size tolerance was (a) thickness : plus/minus 10% of thickness (b) width : plus 3 mm.- minus nil.'
3. The goods under the contract arrived in two consignments under the invoices dated June 17, and June 18, 1974. The goods imported were described as 'prime stainless steel hot rolled coils' admeasuring as specified in the contract. The petitioners filed two Bills of Entry on August 6, 1974 in respect of the goods imported. The Docks Shed Appraiser endorsed the bills with the remarks that the measurements of the thickness taken on one particular coil were 3.05 mm, 3.06 mm. and 3.04 mm. and, therefore, the duty payable is 200% ad valorem as per the Customs Tariff Item No. 63(20A) of the First Schedule to the Tariff Act, 1934.
4. The Tariff Item No. 63(20A) of the First Schedule of the Tariff Act reads as under :-
'Stainless steel plates, sheets and strips and the rate of duty is 200% ad valorem.'
The Government of India, Ministry of Finance (Department of Revenue and Insurance), has published a Notification dated May 29, 1971 which was subsequently amended by Notification dated March 1, 1973 exempting stainless steel plates falling under Item No. 63(20A) of the First Schedule, having the composition specified in Item No. 63(30) of that Schedule from so much of that portion of the duty of Customs leviable thereon which is specified in the First Schedule as is in excess of 60 per cent ad valorem. The Central Board of Revenue has issued instructions to determine which pieces of steel could be classified as plates or sheets. The instructions were that pieces of steel of not less than 1/8' thickness i.e., 3.175 mm. are to be classified for the purpose of assessment as 'plates' and these of thickness less than 1/8' are to be classified as 'sheets.' The Docks Shed Appraiser asserted to levy 200% ad valorem duty on the imported goods on the basis that the advantage of the notification dated May 29, 1971 was not available as the goods imported could not be classified as plates because its thickness was less than 3.175 mm. The Docks Shed Appraiser felt that the goods are to be classified as sheets and, therefore, the ad valorem duty was payable.
5. The petitioners entered into correspondence with the authorities and requested that the measurements taken by the Docks Shed Appraiser are not correct and the thickness was determined by measuring only the edges of the bars and, therefore, the measurements were incorrect. According to the petitioners, it was necessary to unwind the entire coil to determine the thickness and the petitioners were willing to bear the expenses for such unwinding. The petitioners pointed out that the directions issued by the Central Board of Revenue provide for measurement with reference to the uniform thickness and not with reference to the thickness found at the edge of the bar. After this correspondence, the petitioners approached the Deputy Collector of Customs who ordered measurement of thickness to be taken by the Customs House Laboratory and the result of the measurements shows that the thickness varies from 3.160 mm. 3.170 mm. Even in the Laboratory, the coils were not unwounded because according to the Department it involved a lot of trouble.
6. The petitioners ultimately on September 5, 1974, paid the duty amounting to Rs. 21,22,379.22 as claimed by the Department and the duty was paid under protest. The petitioners thereafter filed two refund applications on February 4, 1975 in respect of the two consignments and the amount of refund claimed was Rs. 7,22,771.60 and Rs. 6,65,568.60. The refund applications were considered by the Assistant Collector after the proceedings were remanded to him by the appellate authority for de novo adjudication and by order dated February 13, 1976, the Assistant Collector held that the average thickness of the goods being 3.151 mm., the imported material falls under category of 'sheets' assessable to duty under Item No. 63(20A) and the claim for refund was not justified. The order was confirmed in appeal on November 12, 1976 by the Appellate Collector of Customs and the revision preferred by the petitioners before the Government of India ended in dismissal by order dated December 19, 1977. These orders are under challenge in this petition filed under Article 226 of the Constitution of India.
7. Shri Joshi, the learned counsel appearing in support of the petition, submitted that the measurements taken by the Customs Authorities were totally defective and the assumption that the average reading works out to 3.154 mm. was not justified. The learned counsel also submitted that the authorities below have clearly overlooked that the petitioners are entitled to claim tolerance in thickness as per the trade practice, as per the provision made in the contract and as provided by the Indian Standard Specification for stainless steel plate, sheet and strip. In my judgment, the mode of measurement adopted by the authorities and the conclusion recorded on the basis of such measurement is clearly faulty, and the orders under challenge are required to be set aside on that count. As I am holding in favour of the petitioners on the issue of measurements itself, it is not necessary to consider the question as to whether the respondents are entitled to claim advantage of tolerance permissible under the terms of the contract and as per the trade practice. As regards the measurement, the thickness was measured initially by the Docks Shed Appraiser and on examination, the thickness was found to be 3.05 mm., 3.04 mm. and 3.06 mm. The petitioners complained against the measurements pointing out that the Docks Shed Appraiser has merely measured the coils at edge and not after unwinding the entire coil.
8. Thereupon the Deputy Collector directed measurements of thickness by the Customs House Laboratory. Even the Customs House Laboratory did not unwind the entire coil though the petitioners were ready and willing to bear the expenses of such unwinding. The Deputy Chief Chemist of the Officer of the Chemical Analyser, Bombay Customs House, took six coils and the thickness found at edge, 40 mm. inside and 90 mm. inside was noted. According to the petitioners, the analysis of the above measurements shows that in the majority of cases. The thickness was registered above 3.175 mm. while the Department claims that the average thickness was 3.165 mm. The Assistant Collector in his order adopted a curious method by taking the average of the reading found by the Docks Shed Appraiser on the one hand and that by the Laboratory on the other and recorded a finding that the average reading comes to 3.151 mm. Shri Joshi's grievance that the method adopted by the Assistant Collector to take the average reading was erroneous, deserves acceptance.
It was not proper on the part of the Assistant Collector to arrive at the average reading by considering the conclusion of the Docks Shed Appraiser on the one hand and the Laboratory on the other. The complaint made by Shri Joshi that the Customs authorities have declined to unwind the entire coil even when the petitioners were willing to bear the expenses also deserves acceptance.
9. In paragraph 10 of the return dated September 7, 1981 filed by Shri Anil Taneja on behalf of the respondents, it is asserted that although at the time of the inspection, the petitioners had requested to unwind the entire coil at their expenses for the purpose of measurement of the thickness deep inside the coil, that was not done because it was not possible to unwind the entire coil and unwinding would have involved a lot of trouble. In my judgment, it is not proper to decline the request of the petitioners on the ground that it involves trouble for the Customs authorities. The guidelines issued by the Central Board of Revenue provide that for the purpose of assessment all pieces of iron and steel of uniform thickness will be classified according to the table and this guideline itself pre-supposes that the thickness will be measured on uniform basis and not by taking into consideration the thickness found only at the edges of the coil. As the authorities below have denied the request made by the petitioners and the measurements arrived at are clearly faulty, the claim of the petitioners for refund requires to be granted.
10. It is also required to be noted that the hot rolled stainless steel strips in coil form is a canalised item and the import is permitted only through the Minerals and Metals Trading Corporation Limited. The contract entered into by the Corporation clearly provides that the goods ordered were of thickness of 3.25 mm. and it is not in dispute that what the petitioners desired to import is the plates and not sheets. On the facts and circumstances of the case, the finding of the Customs authorities that the goods imported had an average thickness of 3.151 mm. cannot be accepted. On the other hand, the claim of the petitioners that the thickness was 3.175 mm. deserves acceptance. It is not in dispute that if the thickness is 3.175 mm. then the assessment of duty at the rate of 200% ad valorem was not justified.
11. The petitioners are entitled to the refund of the amount as claimed in the petition. The rule is made absolute and the petitioners would be entitled to relief in terms of prayers (a) and (b) of the petition save and except their claim for interest on the amount of Rs. 13,88,340.20 Though Shri Joshi pressed for the grant of relief on interest, I am not inclined to grant interest on the facts and circumstances of the present case as in my judgment, the authorities could not be said to have acted without any reason or basis. The respondents shall refund the amount to the petitioners within a period of three months. In the circumstances of the case, there will be no order as to costs.